You cannot get away from the IRS whether you stay within the country or overseas. The Federal Revenue Agency keeps a record of your financial wealth for which you need to file the FBAR every year. Failing to file the FBAR will lead to heavy penalties.
However, the IRS might overlook your deeds and choose to only issue you with a severe warning as opposed to the worst penalties possible. This stern warning is done through Letter 3800.
When is FBAR Letter 3800 issued?
When the IRS finds that you are not in agreement with reporting your foreign accounts, an FBAR Letter 3800 is issued. However, the IRS on penalty on FBAR can be forgiven and no fine is imposed. Instead, the IRS issues a stern warning letter which is Letter 3800.
Letter 3800 is issued not because the IRS is confirmed of no violations, rather it is because the IRS is being merciful and foregoing the penalties. The decision to waive the penalties and issue Letter 3800 lies at the discretion of the FBAR examiner.
- The examiner may find that there was a breach, but due to the given facts and circumstances of the case, no consequences are necessary.
- A Letter 3800 is also sent out when there is proof of a careless breach committed by a person.
How to obtain Letter 3800?
For obtaining the FBAR Letter 3800 or the warning letter instead of paying the penalties, the taxpayer’s lawyer must persuade the IRS that your failure to comply was unintentional or non-willful. Individuals fall in the “non-willful” category if they were not aware of the overseas income/ overseas account/overseas asset reporting requirement.
However, the IRS first analyses whether it is a willful or non-willful case. Whatever might be the situation, it is always advised to be vigilant and file the FBAR on time so that one does not have to go through the hassle of applying for an FBAR penalty waiver.